tag:blogger.com,1999:blog-17232051.post4732387215363652036..comments2017-08-18T00:25:03.910-04:00Comments on Noahpinion: Macro, what have you done for me lately?Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger174125tag:blogger.com,1999:blog-17232051.post-83951702475588616702013-01-03T18:51:20.233-05:002013-01-03T18:51:20.233-05:00You clearly did not learn any of &quot;that crap&q...You clearly did not learn any of &quot;that crap&quot;. In undergrad econ we measure social welfare through consumer and producer surplus (the area between the demand and supply curves, ya know?). You clearly were not paying attention.<br /><br />So school choice (including charter and magnet schools) is bad, and conscription prevents leaders from starting wars (you mean like Korea and Vietnam). Some empiricism!CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-13037993900489511162012-12-29T23:53:43.577-05:002012-12-29T23:53:43.577-05:00By the way, I am *really* not kidding about the ma...By the way, I am *really* not kidding about the math. <br /><br />It is now possible, for a select (but very useful) class of real-world problems, to set up the question of &quot;how do we make the most efficient solar panel given the following materials&quot;, or &quot;how do we store the maximum amount of energy in magnetic spin in these substances and then release it on demand&quot;, or &quot;how do we convert magnetic spin energy to electrical energy most efficiently&quot; as a set of equations and inequalities subject to optimization using calculus of variations style techniques -- and then *solve* them in a manner which, when you&#39;re done, produces a (quantum) circuit diagram which can simply be *manufactured*.<br /><br />And nearly all the physicists who are good enough at the math to follow the math correctly are wasting their time in high energy physics. Wasting their minds. There are a few in materials science who are interested and able to follow the math, but awfully few. Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-45828217929070202672012-12-29T23:47:26.670-05:002012-12-29T23:47:26.670-05:00The high energy physicists are completely distract...The high energy physicists are completely distracted. If we could get them to focus on actual physics they might be able to do something useful (I know some mathematicians who can solve the quantum mechanical equations for *actual real world problems*, solar panels, batteries, etc., and they could use some apprentices) but instead they&#39;re wasting their mathematical talent on silliness like the SSD, rather than using it to help the world.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-12808533397539672692012-12-29T23:41:42.776-05:002012-12-29T23:41:42.776-05:00&quot;Neo-Classical economists are dismissive of f...&quot;Neo-Classical economists are dismissive of fiscal policy and want to find ways (no matter how convoluted) of only using monetary policy as an economic management tool. This is clear from the utter disdain that some economists loudly show for fiscal and regulatory policy.&quot;<br /><br />This is because neo-classical economics is an excuse for right-wing plutocratic/kleptocratic policy. The *purpose* of neoclassical economics is to support policies which prevent the government from giving money to poor people, and encourage the government to give money to rich people. I dare you to find a counterexample.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-41125584134853652962012-12-29T23:39:56.719-05:002012-12-29T23:39:56.719-05:00Noah: learn Institutional Economics. It kind of d...Noah: learn Institutional Economics. It kind of died out in the 50s, but it&#39;s the field which tries to explain why Kellogg Brown Root remains rotten and criminal no matter who buys them or what field they go into, while Berkshire Hathaway is straightlaced and honest, no matter who buys them or what field they go into.<br /><br />Institutional economics is all about analyzing institutional culture as a cause of behavior among major economic players, and of course analyzing what causes the institutional culture: it&#39;s the only economic field which can fully explain what went wrong with the economics profession. :-) It&#39;s not fully developed.<br /><br />Game theory economics has two branches: the theoretical, which is somewhat useful; and the experimental, which is EXTREMELY useful. If you value your career research the experimental game theory results, they are really really valuable in describing actual human psychology when it comes to money. I mentioned some of the more impressive results in another comment. It&#39;s veering into behavior at that point, of course.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2171297853633633942012-12-29T23:32:23.600-05:002012-12-29T23:32:23.600-05:00&quot;Note that the EMH just says that all info is...&quot;Note that the EMH just says that all info is incorporated into stock prices.&quot;<br /><br />I don&#39;t see how this is a useful hypothesis. Suppose that Elon Musk knows everything there is to know about Tesla Motors, and so when he trades Tesla Motors stock, that incorporates information into the stock price for Tesla Motors.<br /><br />However, suppose that there are a lot of other ignorant people trading Tesla Motors (there sure are). Their trading will swamp the effect Elon has on the stock price, meaning that the information incorporated into the stock price has a tiny effect on the stock price.<br /><br />You really can consistently make money by figuring out the &quot;true&quot; going concern value of a company -- the discounted cash flow -- and buying the stock when it&#39;s significantly below that. Value investing works. <br /><br />&quot;but the presence of ex ante predictable positive risk-adjusted excess returns is a good one (it requires a model of risk to test).&quot;<br /><br />It exists. Just ask Benjamin Graham.<br /><br />*Even though it works* the number of value investors does *not* increase until it stops working, because analyzing the true going concern value is very hard work even if all the underlying data is public; the analysis is a pain and the corporate execs attempt to make the information as obscure as possible.<br /><br />Even Warren Buffett has screwed up (not spotting the shenanigans at General Re, for instance). People underestimate how much public information is just ignored by most people due to limited attention span.<br /><br />If you have a deal between two experts in a field, *that* price may be an &quot;efficient&quot; or accurate price.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-69609284048410934322012-12-29T23:26:52.670-05:002012-12-29T23:26:52.670-05:00Noah, the &quot;efficient markets hypothesis&quot;...Noah, the &quot;efficient markets hypothesis&quot; isn&#39;t remotely useful for stock market investing, and it isn&#39;t remotely useful for commodities futures market investing, and and it isn&#39;t remotely useful for real estate investing.<br /><br />What good is it? None at all. It isn&#39;t a useful approximation.<br /><br />Not only does perfect information never exist, most market participants have nothing even *approximating* perfect information. That&#39;s the first fatal flaw with the &quot;efficient markets hypothesis&quot;.<br /><br />The correct hypothesis is &quot;most people will not bother to spend the time doing the research on any given product or business or market, and therefore those who bother to do the research will make out like bandits relative to everyone else&quot;. There&#39;s a lot of evidence for THIS hypothesis, which I call the &quot;smart people make money&quot; hypothesis.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-45258356063067396022012-12-29T23:22:25.905-05:002012-12-29T23:22:25.905-05:00You misdefined social welfare. The correct defini...You misdefined social welfare. The correct definition of social welfare is something like median standard of living. Lying about terms is a standard method of right-wing manipluation and one which is particularly popular in right-wing economics indoctrination..<br /><br />CA, nearly every thing you talk about is a big pile of lying shit. (There are a few truths tucked in there, like that cap-and-trade works.) <br /><br />I learned all of that crap, and the key is that *most of this is actually not true*. Voucher systems for schools do not improve GDP or equality. Income is not necessarily a good, because very high incomes for a few people cause a massively distortionary political effect. (And don&#39;t get me started on the &quot;keeping up with the Joneses&quot; effect.) A Volunteer army is not necessarily a good, because it makes it easier for the leaders to go to war. <br /><br />Empiricism helps avoid these mistakes, but neoclassical econ shuns evidence of reality.<br /><br />As Unlearning Econ, who knows 10 times more econ that you do, has pointed out, &quot;In fact, it is only the selectively interpreted neoliberal brand of economics that really says not everyone can be relatively well off.&quot;Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-50515197672233749802012-12-29T23:17:00.068-05:002012-12-29T23:17:00.068-05:00CA, the &quot;research&quot; about long-run growth...CA, the &quot;research&quot; about long-run growth in the 1980s appears to have mostly been wrong. Are you thinking more of the late-1990s material, the part which said &quot;the World Bank is full of shit&quot;? There was some good stuff there.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20239970117753908522012-12-29T23:15:35.237-05:002012-12-29T23:15:35.237-05:00&quot;He should try to respond to my challenge to ...&quot;He should try to respond to my challenge to find a theoretical development which is demonstrably empirically useful and not in &quot;The General Theory...&quot;&quot;<br /><br />I can&#39;t give you one in current *macro*economics. I can&#39;t give you one in neoclassical microeconomics, either (I&#39;m not sure they have discovered anything that wasn&#39;t in Adam Smith, for goodness&#39; sake.)<br /><br />I could give you a few in environmental economics. <br /><br />Or a few in microeconomic experimental game theory. The result that people care about fairness more than about profit under most circumstances is really important. The limits on that are also really interesting -- there&#39;s a &quot;too small to matter&quot; amount of money, where people don&#39;t even bother to calculate, and there&#39;s a &quot;too much money&quot; level where people do become greedy. The differing cultural definitions of &quot;fairness&quot; are also a very interesting set of results.<br /><br />None of this has percolated into &quot;macroeconomics&quot;. Though it damn well should have; fairness is at the core of our current economic problems -- and so is the ability to make obscenely large fortunes through fraud and theft.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80585735817505101942012-12-29T23:10:23.207-05:002012-12-29T23:10:23.207-05:00Because Williamson, at some level, knows that Krug...Because Williamson, at some level, knows that Krugman is completely right, and that Williamson&#39;s life&#39;s work has been wasted.<br /><br />It hurts Williamson&#39;s ego that his life&#39;s work has been wasted, so he lashes out at the person who showed that his life&#39;s work has been wasted. Common human psychology.<br /><br />A healthier response would be Brad DeLong&#39;s: to get over it and start on a new life&#39;s work. But DeLong is a real *mensch*, and that is rare.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-76804916333140984112012-12-29T23:08:26.682-05:002012-12-29T23:08:26.682-05:00Mr. Williamson: you are, however, attempting to pl...Mr. Williamson: you are, however, attempting to place your intellectually bankrupt, disconnected-from-reality economic theories at the center of the academic action. That&#39;s immoral. You don&#39;t realize it&#39;s immoral, because you don&#39;t realize how intellectually bankrupt and disconnected from reality your economic theories are.<br /><br />You should, since they&#39;ve been wrong for decades, appear to have no predictive value at all, and they&#39;ve destroyed the global economy. (DSGE models are particularly worthless intellectually, while &quot;risk assessment&quot; models and &quot;efficient market hypotheses&quot; assisted politically with the destruction of the world economy.) <br /><br />There&#39;s probably a psychological reason why you don&#39;t want to realize the truth about the worthlessness of most of the last 30 years of macroeconomics; I can think of several possible reasons, as can other commenters. <br /><br />We wish you luck in waking up to the reality: you&#39;ve been writing in a field which are about as connected to reality as the medieval Catholic discussions about angels dancing on the head of a pin. They thought they were discussing reality too.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-75841700897880515022012-12-29T23:01:02.377-05:002012-12-29T23:01:02.377-05:00You and Brad are correct. There has been no usefu...You and Brad are correct. There has been no useful macroeconomics developed in the &quot;mainstream&quot; of the profession (as opposed to folks like D. McCloskey) since the 1970s. (Well, OK, maybe a little bit in international trade, hat tip to Prof. Krugman.)<br /><br />The debunking of the Phillips Curve may have been the last useful thing done in Macro. And it was replaced with the stupidest piles of bullshit ever: Friedman&#39;s and Lucas&#39;s critiques were *both wrong*. Extremely wrong.<br /><br />At this point, after studying the period, I am convinced I know why the Phillips Curve failed.<br /><br />The Phillips Curve was wrong solely because it didn&#39;t account for key resource shortages. In the 1970s, that was mostly peak oil and the OPEC oil shocks. Yes, the inflation started a bit earlier -- due to CROP FAILURES and FOOD SHORTAGES, which will have the same effect! (I only just studied enough history to figure this bit out.) <br /><br />Everything was amplified by the thoughtless wage and price controls under Nixon, which induced *artificial* shortages on top of the real ones.<br /><br />Most economists still haven&#39;t figured this out! The entirety of macroeconomics has gone down a wrong path because y&#39;all *never figured out what went wrong in the 1970s*. The answer was: real resource shortages. *Only the environmental economists paid attention to this.* <br /><br />The Phillips Curve works *only* if labor is the limiting resource in the economy. In that case, it shows that inflation goes up when employment goes up and inflation goes down when employment goes down. But labor isn&#39;t always the limiting cofactor of production for the economy.<br /><br />If oil is the limiting resource in the economy, suddenly it&#39;s a curve showing that inflation goes up when oil use goes up, and inflation goes down when oil use goes down. <br /><br />This will be relevant again if we start increasing employment, since easy-to-extract oil is gone. The country with the least oil-dependent, most solar-based economy will have the lowest inflation.<br /><br />If food is the limiting resource, then suddenly it&#39;s a curve showing that inflation goes up when food use goes up and inflation goes down when food use goes down. Uh... except we can&#39;t ethically control that in the short term... so in that case, live with the inflation, it&#39;s unavoidable. Oh, and encourage birth control so as to reduce the population.<br /><br />It&#39;s important to realize that the limiting real resource for the economy is not always labor. This is an insight which, among macroeconomists, *only* the environmental economists seem to have appreciated.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24305590483185290962012-12-29T03:04:10.819-05:002012-12-29T03:04:10.819-05:00(In passing. I didn&#39;t know so many academics ...(In passing. I didn&#39;t know so many academics had picked up this discussion, and so didn&#39;t follow it.)<br /><br />&quot;...not rancorous...&quot;<br /><br />The in the second sentence of Prof. Williamson&#39;s post he calls Krugman&#39;s writing deranged, and in the first he says the discussion is &quot;light entertainment.&quot; This drips with contempt.<br /><br />Why so much contempt for a colleage?The Ravenhttps://www.blogger.com/profile/06634556869209594389noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-40925884352915010662012-12-25T23:19:44.507-05:002012-12-25T23:19:44.507-05:00&quot;it is as &quot;chaotic&quot; as the ignoranc...&quot;it is as &quot;chaotic&quot; as the ignorance and perfidy of economists make it.&quot;<br /><br />You seem to think that all voter are economists voting for candidates who are also economists and govern professionals who are themselves economists. The truth is, the system is chaotic because of the stupidity of people like you. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-91845741144551855172012-12-24T16:55:35.558-05:002012-12-24T16:55:35.558-05:00No, but when their policies failed they had an exp...No, but when their policies failed they had an explanation of why they did so. Is this not a contribution? I really can&#39;t understand what you are blaming economists for. Because policy-makers don&#39;t listen to them? Because theories are abandoned only after the data do not conform with them? Isn&#39;t this how all sciences deal with competing theories?CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-62555905706867653392012-12-24T16:48:41.700-05:002012-12-24T16:48:41.700-05:00Rejected which explanations? Real or imaginary one...Rejected which explanations? Real or imaginary ones? If they rejected the first I have no problem. My problem is that they substitute the first with the second.<br /><br />John Stuart Mill&#39;s response was that reinstating slavery was not a solution to the problem Carlyle was trying to address. No free lunch!<br /><br />Social welfare has a very precise definition: It is defined as economic surplus. But economists quite often (see for example Mankiw&#39;s &quot;Principles of Economics&quot;) point out that there is a trade-off between maximizing social welfare (as defined) and pursuing other worthy social goals, like reducing inequality. Economists cannot say anything about how much one should pursue one goal over another, as this involves value judgment. Economists CAN help point out such trade-offs when they are not immediately apparent, and measure the cost of alternative policies that achieve the same outcome so that policy-makers can pursue whatever goal they deem worthy while imposing the smallest possible economic cost. Examples incluce &quot;cap and trade&quot; instead of setting pollution limits for each plant, government-funded school vouchers instead of ONLY public schools, taxing bads like gasoline instead of goods like income, voluntary army versus conscription, etc. <br /><br />This is the exact opposite from what you say. Economists are not promising innumerable benefits. If anything we are suggesting that such promises are void and usually dangerous. What we are saying is that better-designed policies can make life somewhat less miserable and create an environment that will encourage medical doctors, engineers, entrepreneurs, and others act in ways that improve our lives. They are the ones we look up to for &quot;benefits&quot;, while remaining aware that such benefits are usually limited, not innumerable.<br /> <br />Before you unlearn econ, don&#39;t you think you need to learn it first? CAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72843346956999964162012-12-23T08:40:25.481-05:002012-12-23T08:40:25.481-05:00That doesn&#39;t prove that policy makers abandone...That doesn&#39;t prove that policy makers abandoned it because Friedman said so. And I was there at the time. Were you?reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-65762488827037730782012-12-23T05:03:15.470-05:002012-12-23T05:03:15.470-05:00Well, this was more direct than my &quot;respond t...Well, this was more direct than my &quot;respond to absurdity with more absurdity&quot; reply...Michael Harrisnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-88926317368193716822012-12-22T19:09:13.933-05:002012-12-22T19:09:13.933-05:00It doesn&#39;t explain why a profession with scien...It doesn&#39;t explain why a profession with scientific pretenses insists on methods, theoretical and empirical, which will not let them arrive at a conclusion in under a thousand years.<br /><br />In answer to the question, &quot;What have you done for me, lately?&quot;, I think I would count the consequences of policy since around 1999, including the debacle of the GFC 2008, against the profession. <br /><br />The economy, in contrast to the seismology of the earth, and even in contrast to the weather/climate, is almost entirely artifactual. You may wish to regard the economic system as complex, but you really don&#39;t have grounds for regarding it as chaotic -- it is as &quot;chaotic&quot; as the ignorance and perfidy of economists make it. And, there&#39;s no more damning case to be made than the response of economists to, and complicity in, the &quot;savings glut&quot;, housing bubble and global financial crisis. Bruce Wilderhttps://www.blogger.com/profile/09631065564839959376noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-55888889707704384112012-12-22T10:22:49.885-05:002012-12-22T10:22:49.885-05:00&quot;So you tell me, if someone who claims they h...&quot;So you tell me, if someone who claims they have studied economics comes out and says the exact opposite, what am I to conclude?<br /><br />A) They had a very bad teacher<br />B) They were a bad student<br />C) They have a beef <br /><br />If you have any other explenation, I am happy to hear it.&quot;<br /><br />They *rejected* the explanations offered.<br /><br />&quot;Yes, so how does arguing against slavery show that the statement was about the opposite?.&quot;<br /><br />I&#39;m saying arguing against slavery is acknowledging that moves can be made to improve the lot of large numbers of people. I wouldn&#39;t say this is in the same vein as your seeming preference for &#39;harsh but realistic prescriptions.&#39;<br /><br />I&#39;d also like to take issue with this:<br /><br />&quot;Look, maybe you got a bad grade in ECO 1 or something, but this does not excuse your misrepresentation of facts. Economics has been called &quot;dismal science&quot; for a reason, clearly not for promising &quot;innumerable benefits&quot; but rather for highlighting the hollowness of such promises.&quot;<br /><br />Many economic theories talk about maximising social welfare. In fact, it is only the selectively interpreted neoliberal brand of economics that really says not everyone can be relatively well off.Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33975368973713394282012-12-22T10:17:29.044-05:002012-12-22T10:17:29.044-05:00I&#39;ve only scanned the comments, but spotted no...I&#39;ve only scanned the comments, but spotted no mention of data issues. To take the US case, maybe we can accept data from 1982, though interstate banking was in its infancy and global capital markets had yet to recover to pre-1914 levels. So, generously, that gives us 120 quarterly observations, plagued by real-nominal conversions and the inability to measure many key variables. That&#39;s simply too few degrees of freedom to produce convergence, given the number of variables that we believe we know matter (I use readings by Jesus Fernandez-Villaverde and Ray Fair with my undergrad seniors). So is it any wonder that fundamentally inconsistent models and policy stances persist?Mike Smitkahttps://www.blogger.com/profile/10310816368811158899noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21115431200582318572012-12-21T17:39:15.775-05:002012-12-21T17:39:15.775-05:00&quot;He&#39;s not addressing anything. He&#39;s m...&quot;He&#39;s not addressing anything. He&#39;s making stuff up&quot;<br /><br />Noah, this is why people are looking at you strange. Your friend here is the intellectual equivalent of a guy smeared in his own feces, while you pretend that he&#39;s a normal guy.Barryhttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21862122976960696242012-12-21T16:28:51.787-05:002012-12-21T16:28:51.787-05:00Steve Keen did predict the economy, when almost no...Steve Keen did predict the economy, when almost no one else did. I don&#39;t consider myself a post-Keynesian, but your comment about Keen was dismissive, rude and an indication you simply refuse to give credit due to some non-empirical dislike.<br /><br />By the way, didn&#39;t you acknowledge in a comment a few months ago, where you advocated a tax increase in Japan, that you hadn&#39;t really paid much attention to post-Keynesian work? Did you recitify that with intense study since then?Ben Johannsonnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16899580405674678262012-12-21T13:39:17.918-05:002012-12-21T13:39:17.918-05:00Well, I&#39;ve seen a number of these &quot;evolut...Well, I&#39;ve seen a number of these &quot;evolutionary markets&quot; models recently, and they are very interesting of course.<br /><br />The problem is, they are very rigid. The strategies can&#39;t change and evolve nearly as much as real strategies can. It&#39;s possible to get dynamics in these simple ecosystems that are far removed from what we see in real markets.<br /><br />But on the other hand, I&#39;m very interested in this sort of model to explain some of the experimental results I&#39;ve been getting...<br /><br />BTW, did you know that bloggers Mark Thoma and Rajiv Sethi have worked on these sorts of models?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.com